W. T. Rawleigh Co. v. McLeod , 151 Wash. 221 ( 1929 )

I am unable to concur in the conclusion reached in the foregoing opinion. With the statement of the facts therein recited, I have no quarrel, but I am wholly at variance with the deductions that are drawn from the facts.

The community property laws of this state, it must be confessed, present many perplexing problems. The definitions contained in the statutes of that character of property, as well as the definitions of what constitutes separate property, are sufficiently clear in so far as they go, and, so long as property is acquired in any of the methods falling strictly within these definitions, no difficulty arises. But the statutes do not meet all of the situations by which property may be acquired. For illustration, property may be acquired in part by means which would bring it within the definition of community property, and in part by means which would bring it within the definition of separate property; community and separate property may be so commingled as to render it difficult or impossible to separate the one part from the other; separate property may be acquired by one of the spouses, which, at the date of its acquisition, has but little value, but which, by the combined efforts of both of the spouses, may be brought to a considerable value; and the spouses may make contracts between themselves by which community property is changed to separate property, or by which separate property is changed to community property. As between the spouses themselves, when some one of these situations arise, there is usually not much difficulty in doing substantial, if not exact, justice. But it is not so easy where the rights are acquired by a third person against one of the spouses, and that person undertakes to sequester the rights of such spouse in the property to his own benefit. To meet the situations such as I have pointed out, this court, while realizing that no general rules can be formulated which will meet every situation that may arise, has adopted certain general rules by which it will be guided in the consideration of the questions. The first and, to my mind, the principal one of these, is that all property acquired by married persons subsequent to the marriage is presumptively community property. This rule was laid down in the early case of Yesler v.Hochstettler, 4 Wash. 349, 30 P. 398, and I know of no subsequent case where the rule has been departed from, while the cases affirming it are so numerous that it would be idle to cite them.

In my opinion, this rule alone should control the case before us against the conclusion of the majority, even assuming, as the majority do assume, that the purchase price of the property was paid entirely by the respondent husband. There must come a time, I think, when this presumption becomes absolute. This property, it will be remembered, was acquired nearly a quarter of a century ago. The respondents moved upon it immediately, and have ever since made it their home. They have at all times claimed it as community property, and have, by their joint labor and frugality, so improved it as to increase its value more than fivefold. They have been honest in their claims and purposes. Their acts were not prompted by any fear of the claims of creditors or other claims. They have but conclusively presumed the property to be what the law said it presumptively was. Had the appellant been claiming under an absolute title, its right to recover the property as against the respondents would have been long since barred by the statutes of limitations, and that it may now, as a simple judgment creditor of one of the spouses, claim it to be held by a different title than the owners themselves have all of these years openly asserted it to be so held, is not in accord with my idea of the statutes and general rules of law intended to prevent the enforcement of delayed and stale claims.

But I think there is another reason why the property should not be held to be the separate property of the husband. As shown by the facts recited in the majority opinion, the wife had, at the time the marital relation was entered into, separate property of her own, approximately equal to that possessed by the husband. At the time the exchange was made, it was orally agreed between the husband and wife that the wife would invest her separate holdings in improvements on the acquired property, that they would occupy it as their home, and that it should belong as much to the one as the other. It is possible that, when the agreement was formulated, the parties did not use the term "community property," but I think no one can doubt that it was the intention of the agreement to hold the property by the title that property acquired after marriage is usually held by husband and wife; that is, as community property. The majority give no effect to this agreement, for the reason, presumably, that it is thought to be invalid. But if this be the reason for not recognizing it, I think it unfounded. The agreement was founded upon a valid consideration, and was executed by the parties to it in so far as it was capable of execution; that is to say, each of the parties paid the consideration agreed to be paid, and since the time of its execution, for a period of more than twenty-two years, have recognized it and acted upon it as a valid agreement. Manifestly, neither of the parties themselves could repudiate or invalidate it to the detriment of the other, and it being valid as between the parties, I see no reason why it is not valid as against all others whose interest to question it arises subsequent to the time it was entered into and acted upon. I concede that, had the appellant been a creditor of the respondent husband at the time the agreement was made, its rights against the husband's property would not have been affected by the agreement, but it was both shown and admitted that it was not then a creditor.

Our cases, as I understand them, have heretofore been in favor of the foregoing principle. In the somewhat early case of Yakev. Pugh, 13 Wash. 78, 42 P. 528, 52 Am. St. 17, it appeared that the husband and wife entered into an oral agreement to the effect that the personal earnings of the wife in following certain pursuits should be her separate property. Acting under the agreement, the wife made earnings which she invested in personal property. Certain creditors of the community, who had become such after the agreement and after the property had been earned, sought to satisfy a judgment out of the property so acquired. It was held that the property was the separate property of the wife, and not subject to sale for a community debt. In Dobbins v. DexterHorton Co., 62 Wash. 423, 113 P. 1088, under a similar agreement, the wife acquired real property by her personal earnings, which was sought to be taken by a creditor in satisfaction of a community debt. We held the contract valid, and that the property acquired thereunder was the separate property of the wife. A similar agreement was again upheld in Gage v.Gage, 78 Wash. 262, 138 P. 886. In Union Securities Co. v.Smith, 93 Wash. 115, 160 P. 304, Ann. Cas. 1918E 710, an oral agreement between husband and wife, made after marriage, to the effect that all of the personal earnings of each of them should be the separate property of the spouse earning it, was upheld; the court saying, that "such contracts made after marriage and mutually observed, are valid." In Volz v. Zang, 113 Wash. 378,194 P. 409, there was an agreement between husband and wife to the effect that the separate property of the parties

". . . shall be by us, and by all persons whomsoever, deemed, esteemed, regarded, treated and known as community property."

After the death of the wife, her heir claimed an interest in the property on the ground that the agreement was invalid. The court, citing our former cases, held the agreement valid, using, in the course of the opinion, this language:

"These cases hold that community property may be changed to separate property regardless of § 5919, Rem. Code. If this is so, the converse must be true, that separate property may be changed by a proper conveyance or agreement into community property. The policy of the law is in favor of community property, and there is no provision in the law operating against the agreement of February 16, 1915, taking effect as it was intended."

And in In re Martin's Estate, 127 Wash. 44, 219 P. 838, an agreement was recognized as valid, in which it appeared that a husband and wife had divided their accumulated property between them; the court saying, in effect, that we had repeatedly held it competent for married persons, when the rights of creditors did not intervene, to divide their property, and enter into an agreement that thereafter the earnings of each of them shall be the separate property of the one earning it.

In principle, I can see no difference between the contracts held valid in the cited cases and the contract entered into in the instant case. Indeed, it seems to me there is less reason to favor them than there is to favor the instant contract. This one contains elements not present in the others — elements which seem to me to appeal more strongly in favor of the rule than do any of the others. To recapitulate the facts, at the risk of repetition: Here the contract was entered into after marriage. It was entered into prior to the acquisition of the property and in contemplation of its acquisition. There were then no creditors, or other persons, whose interests could be adversely affected by it. Each of the spouses had, at that time, approximately an equal amount of separate property, and it was agreed that this should be invested in the property, and it was, at the time of the acquisition or shortly thereafter, actually invested in it. The contract has been continuously acted upon since it was entered into, during which time the parties have, by their common efforts, greatly added to its value. Manifestly, it seems to me, the court would not say that, as between the spouses, the property was the separate property of either of them, and, this being true, it should not say that it is separate property as to a creditor. This view is not to deny the operation of the rule stated, and relied upon as controlling, in the majority opinion. On the contrary, it is but an affirmation of that rule. It is but to say that a husband and wife can orally make a lawful agreement to acquire real property, and may further lawfully agree that the property when so acquired shall be their community property, regardless of the source from which the purchase price of the property may come. The title to the property is still fixed as of the time of its acquisition, but it is fixed in accordance with the agreement, not from deductions drawn from the source of the purchase price.

There is still another reason why I think the property should be held to be the community property of the respondents. It is a rule, well settled in this jurisdiction, that, where separate funds have been so commingled with community funds that it is impossible to apportion them, all of the commingled fund, or the property acquired thereby, is community property; this because of the presumption in favor of the community and the favor with which the law regards such property. Yesler v. Hochstettler,4 Wash. 349, 30 P. 398; Doyle v. Langdon, 80 Wash. 175,141 P. 352; In re Buchanan's Estate, 89 Wash. 172, 154 P. 129;Jacobs v. Hoitt, 119 Wash. 283, 205 P. 414; In re Carmack'sEstate, 133 Wash. 374, 233 P. 942. As shown by the recital of the facts made in the majority opinion, the present value of the property in question is the result, for its far greater part, of the community efforts of the husband and wife. They have brought it from a comparatively small value to its now considerable worth. How much of this increased value is due to natural causes, or is due to the community efforts of the respondents, there is now no way of ascertaining with any degree of exactness. It is again to be remembered in this connection that, when the funds were actually commingled, there was no separate creditor of either spouse who had a right to complain of the acts of the parties in that regard; that the creditor now complaining became such long after the commingling commenced, and after it had continued for a period more than double the time fixed by the statute of limitations as a bar to a recovery of the property, even by one who could show a superior outstanding title. There was here, in my opinion, such a commingling of separate and community funds as to require the application of the rule above cited, rather than the rule applied by the majority.

But, if I am wrong in the foregoing conclusions, I think that, taking the view of the transaction the majority adopt, the judgment they have directed is erroneous. It will be remembered that the wife had invested in the property given in exchange for the property in question, at least one hundred and twenty-five dollars of her own separate funds. This, measured by the actual cost price of the property, was a considerable proportion of its value. Since the title is to be determined by the source of the purchase price, I see no reason why the wife should not be accorded an interest in her own separate right in the property in the proportion that the amount advanced by her bears to the total of the purchase price. Possibly the majority, although they do not so state, treat the advance of the wife as a gift to the husband, or possibly as an investment which would give her no interest in the property in which it was invested. But to the first of these possibilities, it is a sufficient answer to say that the evidence does not show it to be a gift, and there is no rule of law that conclusively makes it so. To the second, I think it a sufficient answer to say that her investment added value to the property exchanged, and that this value went into the purchase price of the property received in the exchange. Manifestly, her contribution to the purchase price was as potent as was that of the husband, and any rule of law which would vest a separate title in him would also operate in her favor, and the judgment permitting a sale of the property should be limited to a sale of the husband's interests only, leaving the question as to the interest acquired to future determination.

My conclusion is that the judgment of the trial court should be affirmed; but, if it is not to be affirmed, there should be a modification of the order directed by the court.